FINRA Moves to Tighten Brokers' Ability to Borrow Client Money

Second, FINRA would define “customer” to include “any customer that has, or in the previous six months had, a securities account assigned to the registered person at any member.”

This change, FINRA states, “would extend the rule’s limitations to borrowing or lending arrangements entered into within six months after a broker-customer relationship terminates.”

Third, FINRA plans to add Rule 3240.05 (Arrangements with Persons Related to Either the Registered Person or the Customer).

Proposed Rule 3240.05 “would address the potential for customer abuse that arises when a registered person induces a customer to enter into a borrowing or lending arrangement with a person or entity related to the registered person or, likewise, induces a customer to have a person or entity related to the customer enter into an arrangement with the registered person,” FINRA explains.

FINRA’s plan would also redefine the term “immediate family.”

As it stands now, “immediate family” means “parents, grandparents, mother-in-law or father-in-law, husband or wife, brother or sister, brother-in-law or sister-in-law, son-in-law or daughter-in-law, children, grandchildren, cousin, aunt or uncle, or niece or nephew, and any other person whom the registered person supports, directly or indirectly, to a material extent.”

The revised rule would replace “husband or wife” with “spouse or domestic partner” and amend the definition so that it “includes step and adoptive relationships.”